Posted on 12/03/2021 7:20:07 PM PST by jfd1776
As this terrible year of supply chain disruptions continues to worsen, we struggle to understand certain impossibilities.
Why pay higher prices for worse service?
Why can’t we end this crippling dependence on Chinese goods?
And today’s question: how is it that there are more ships in the Pacific than ever before, but less capacity, so the cargo we need still doesn’t move?
The Biden/Harris regime is proposing all sorts of illogical ideas, usually based on fines and surveys… because if penalties and questions are the things that politicians fear most, then surely penalties and questions can magically double the size of our ports and rail yards to ease the congestion at our many sea freight bottlenecks. Right?
Well, actually… No.
All the federal surveys in the world won’t help if the government isn’t interested in the responses they get, and fining people for things that are out of their control isn’t going to change behavior; it just makes the bottom-line expenses go up and contributes to inflation.
So what IS the reason, then? We have been told that there are more containers and more ships in the transpacific trade lane than ever before (and this is true). But if so, then why isn’t cargo moving?
While there are dozens of causes, the short answer is an ocean freight term called “blank sailings.”
THE BUS ROUTES OF THE SEA
It has been said that for 3000 years, ship owners moved freight, but since the dawn of the containerization era, ship owners move boxes. That is, they are now in the business of positioning empty intermodal containers – 20’ long, or 40’, or 45’ – for exporters to load, and then the shipping company moves that container, by truck, rail, and ship, to the destination country, where the container is emptied, reloaded, and put back into commerce as an export again.
For the past half-century, the various containership lines have honed the concept of the “container service” – numerous set service loops in which distinct, regular routes are offered, almost always on a weekly basis.
Let’s say a carrier wants to offer a regular service in which six ports are called, such as, Xiamen, then Yantian, then Kaohsiung, then Keelung, then Los Angeles, then finally Oakland. Four ports in Asia, and two ports in the US southwest. In order to cover the transit time involved as the ships sail from port to port, allowing for two or three days in port at each one, as thousands of containers are loaded and unloaded, it might take 42 days for one ship to make that complete round trip.
If they want to offer a weekly service for this offering, six or seven ships are necessary. These ships sail this route, again and again, from year to year.
With such ships ranging from about 3500 to 20,000 TEUs (a TEU is a 20’ Equivalent Unit), each of these ships is therefore moving many thousands of containers each week. Over the course of a year, we’re talking about almost countless millions of containers per year in any given trade lane.
There are hundreds of services like this, all over the planet, dozens in the transpacific alone.
It all works just like a city’s bus routes:
Imagine a city with a hundred distinct bus routes, each with an hour-long round trip, and they want to promise a bus every fifteen minutes at each stop. Each hour-long route requires four buses to provide such dependable service, so the city might need four hundred buses to provide such a dependable service. Walk down to the bus stop, and your wait will never be more than fourteen minutes, as the four buses of that particular route make their way through their designated circles.
Dozens of ocean carriers offer such services in the transpacific trade, and each service calls different ports in a different order. Taken together, in theory (and until recently, in practice), these many services enable any shipper to find a perfect match between the day their cargo is available to ship, and the destination port where the goods would be needed.
The market offered such a wonderful variety – this carrier might call Busan first, that one might call Kaohsiung first; this one might be direct to Seattle, that one might head straight to Los Angeles – and there was always sure to be a match for any exporter or importer’s needs.
In addition, the ocean shipping industry prided itself on great service schedule reliability; if there was supposed to be a sailing from Xiamen to Los Angeles tomorrow, there would be. It was a pretty dependable program.
Until now.
The ship owners have put more and more ships into the transpacific this year as volume demand has climbed, and yet, it’s not enough capacity to meet the demand.
In fact, your local store shelves are likely empty in part because the store’s foreign vendors have not yet been able to secure space on a vessel yet. Goods are ready and waiting to ship, but cannot, because there is no ship to put them on.
THE BUS ROUTE COLLAPSES
In 2021, volume grew past the ability of many systems to handle the throughput. Ports like Seattle and Los Angeles could unload ships as fast as the ships arrived, but the inland transportation services – trucks and railroads – could not handle this volume so quickly, so the cargo started piling up, clogging the seaports, necessitating slowdowns in the processing of ships. The problem quickly spread to the inland railyards (which were already overwhelmed even before 2020), as the major rail hubs also can’t handle these incredible volumes.
The one visible display of this problem has been the omnipresent line of containerships outside our major seaports all year, waiting to be worked. Seattle, Tacoma, Los Angeles, New York, Norfolk, Charleston, all our seaports have seen increases of twenty to forty percent over what they were accustomed to handling, so they now see ten, twenty, thirty ships sitting in their harbors for days or weeks. A ship that should have made a round trip in 42 days may now take 84, or worse, because of all these unproductive days and weeks of sitting at anchor, waiting their turn in line.
The transit times have therefore doubled or tripled, which has caused the steamship lines to have to triple or quadruple their freight rates (if a ship only produces revenue half or a third as often, the price must rise in order to pay for itself).
What many in the shipping community are only now realizing, therefore, is that even with added ships in the trade lane, these longer transit times are eliminating capacity.
Let’s return to the bus route analogy:
If a bus route of four buses suffers just one breakdown - say, one bus is out of commission for a couple of days - then it can’t offer those four fresh bus stops per hour on that route, can it?
To the person waiting at the bus stop, it only looks like “the bus is late”, but in fact, the bus they were waiting for is gone; it’s disappeared entirely, and its 44 seats of “capacity” with it.
The commuter at the bus stop only thinks he’s had to wait an unplanned fifteen minutes; he doesn’t realize that the bus company has lost, not 44 seats once, but 44 seats per hour for as long as the route runs (perhaps, dawn to dusk, weekdays?), for as long as that bus is broken down. At a dozen regular runs of this bus route per day, our fictional bus company has lost 528 seats per day – potentially 528 fares, from a financial perspective, but potentially 528 passages, from the commuters’ perspective. If these routes were usually full (which they aren’t, in most cities), then missing that one bus might well cause a lot of people to be unable to get transportation for a few days.
Perhaps most frustrating, they wouldn’t know until they got to the bus stop, and tried to board, whether they’d be shut out of available seats or not.
Luckily, this doesn’t happen quite this way in the bus business… at least not often… but it’s been happening like this all day, every day, this year, in the international seafreight business.
THE PAIN OF THE BLANK SAILING
For the world’s container ship lines this year, the immediate problem has not been vessel breakdowns but these port delays. The lines continue to publish schedules for each of their dozens of sailing strings – their “bus routes” – but there is simply no way to estimate the port calls with any accuracy, because the waiting times outside each port vary from week to week.
A ship may sit outside Seattle for two days, or four, or seven, or ten. It may sit outside Tacoma for three, or five, or eight. It may sit outside Los Angeles for seven, or ten, or fourteen days.
This means that they may want to offer a sailing at Kaohsiung tomorrow, and at Keelung a couple days later... but they can’t, because they now realize that the ship intended to call those ports is still sitting in at anchor outside Los Angeles, waiting its turn to be unloaded.
Traditionally, when such delays occurred, the carriers would drop a port call or two from the schedule so that it could get caught up again. If a ship is a week late, it would skip two ports and rejoin its regularly scheduled route at the third port. Cargo booked for that sailing would simply catch the next ship on that string, or another ship from the same carrier on a different string that also calls that same port.
These skipped ports were always known as blank sailings – a stop registered on a published schedule that never materialized because there was no ship to make the stop.
Occasionally, if a ship was pulled into drydock for repairs, an entire week’s calls would be dropped, not just one or two port calls, but that whole set of calls for one week of that string… just like taking a bus out of a bus route for a while. It has always been a source of frustration when this happened, because shippers and carriers must scramble for alternate sailing options to move the freight they had booked.
The problem in 2021, however, takes this concept to a new level.
Blank sailings are everywhere, as doubled transit times mean that in some lanes, a third of the published sailings have to be canceled. There isn’t enough predictability to these waiting times for the carriers to factor it in fully, as they write new schedules, so the schedules are constantly changed, and planned voyages are declared blank, after thousands of shippers already had bookings on them.
So the shippers must scramble for new bookings, and as there is no space available, the cargo sits, and sits, and sits, being rebooked and rebooked, until there’s finally a ship with room for their containers.
JUST A HINT OF THE NUMBERS
We have been talking in broad tones, but let’s look at some hard numbers for a moment.
- Each ship in the transpacific trade lane handles thousands of containers. There is a wide range of sizes in this trade lane, from about 3500 TEUs (about 1750 x 40’ containers) to 20,000 TEUs (about 10,000 x 40’s) each.
- When a single voyage – one round trip of a string – is cancelled as a “blank sailing” due to the waiting times at the ports, that’s anywhere from 3500 to 20,000 TEUs of capacity that have been completely removed from the trade. Two years ago, there would have been those thousands of container crossings, and now there aren’t. That block of capacity has evaporated.
- The problem is global; ships are sitting outside ports all over the world. We talk about the USA problem because we are here in the USA, but there are ships lined up outside Rotterdam, Antwerp, Hamburg, Shanghai, and Ningbo. Every major port today has dozens of ships waiting a week or more to be unloaded, contributing to this problem. But yes, the US west coast ports are suffering the longest such waits.
- Over 80 blank sailings have been announced for the six-week period between Thanksgiving week and New Year’s, in just the transpacific trade alone. That’s over 80 ships, ranging from 3500 to 20,000 TEUs, removed from the trade lane in six weeks. That’s somewhere around a half million truckloads of capacity removed from the trade for year-end alone.
- The carriers have moved more and more ships into the transpacific trade all year long. The global container ship fleet is at virtually 100% utilization right now. But with transit times all but doubled by these harbor waits, now we see why even an increase in the number of ships in the trade can still result in a reduction in available capacity for commerce.
CAUSES AND EFFECTS
Obviously, there are partial solutions available. If we made more of our products in North America and depended less on Asia, we’d suffer less from such problems. There is no good reason – except for crippling taxes and regulations – why the United States imports so much. We should be a huge net exporter, able to compete with the rest of the world on the production of most products.
Unfortunately, at the moment, we have entirely stopped making many things in the USA at all, so we would need to totally rebuild the industries – with the human expertise, the physical plant equipment, and the material supply lines – in order to bring them back.
So, for the time being, while we wait for such an American manufacturing renaissance (like the one that was going on until the January 2021 regime change in Washington, DC), we must continue to depend on imports from overseas, especially from Asia.
And that is the very worst of all the trade lanes at the moment… and in all likelihood, this problem will last at least several more years. Yes… at least.
Are there things we could do to improve all this? Sure. Our seaports need to buy more land and expand, as do our major inland rail hubs. Our governments – from local to federal – need to eliminate the pointless “Covid safety measures” that have slowed down container handling from port to warehouse. Our state governments need to eliminate their outrageous restrictions on normal trucks, reducing the available fleets to unionized drivers of only late-model trucks (in California, the state that can least afford such idiocy).
But the details on these options must wait for another column. All I hoped to do in this one was to explain how it is that more ships and more containers in a trade lane can still equal less capacity…. How all the attention in the world can’t help, when long unproductive waits in harbors take millions of containers worth of capacity out of the marketplace over the course of this year.
So if you walk into the department store this week, whether for personal shopping or Christmas gift buying… or if you’re working at the office and you don’t understand why your plant hasn’t yet received that order from your foreign vendor…
Then don’t assume your provider forgot to place the order. Don’t assume your vendor couldn’t get parts. Don’t assume your vendor didn’t make the product.
In all likelihood, that product you’re looking for is sitting somewhere in transit – stuck in an overwhelmed port to be handled by overworked, “social distanced” workers, or stacked up, waiting for a union driver with a hybrid vehicle to pick it up because all the normal owner-operators of normal diesel trucks have been banned from the port by environmentalist wacko state legislators.
Or worse yet, that product you’re awaiting is sitting in your foreign vendor’s warehouse, collecting dust for months now, as your vendor’s freight forwarder struggles to find a ship with enough room to take your order sometime before today’s schoolchildren reach retirement age.
The Chinese say, “May you live in interesting times.” And it is no longer a surprise to anyone when you remind them that this particular saying is a curse.
Copyright 2021 John F. Di Leo
John F. Di Leo is a Chicagoland-based trade compliance trainer and transportation manager, writer and actor. A one-time county chairman of the Milwaukee County Republican Party, he has been writing regularly for Illinois Review since 2009.
A collection of John’s articles about vote fraud, The Tales of Little Pavel, and his 2021 political satires about current events, Evening Soup with Basement Joe, are available, in either paperback or eBook, only on Amazon.
https://finance.yahoo.com/news/vancouver-cut-off-road-rail-223708202.html
Don’t forget Climate Change :)
It doesn’t matter if you are shipping
container freight, crates, barrels, or burlap sacks,
if you are shipping more than the ports can handle, then,
ships have to sit and wait to unload their cargo.
Nothing made in the U.S.A. is sitting off the coast.
Only an inbred, idiotic establishment would think that you could lock down everyone who does real physical work, engage in mass firings, and expect that the manufacturing of goods, shipping, and services would be uninterrupted. The only other possible explanation beside stupidity is that this is being done on purpose because they are just evil. Either way it just means that they have to go.
Orange Man bad.
Chineese good.
You can track shipping here: https://www.marinetraffic.com/en/ais/home/centerx:-100.7/centery:33.1/zoom:4
We need real import tariffs, lots of tariffs. After that, more tariffs.
“Nothing made in the U.S.A. is sitting off the coast.”
I have a domestic product still on order [70 day delay]. Something about worker shortage.
It’s Kr@p.....
I saw on a Youtube video yesterday that Newsome had all the ships move beyond the horizon so people would think the problem at our port was being taken care of. It is actually getting worse every single day. It’s just that nobody can see how bad it is.
True and certainly none of the ships themselves. God forbid we have a ship building industry in the USA.
Wage shortage more like it.
“Why can’t we end this crippling dependence on Chinese goods?”
Because we don’t have the gonads to put an end to LABOR UNIONS in the United States...so we will outsource, forever, at this point.
“Ships should be move to Texas and Florida they will get unloaded.”
-
It is not that simple.
Those ports are mostly also overloaded,
and ground logistics have to be arranged.
at the moment, a LOT of it is just over the horizon so it looks like the backlog is getting cleared up...
A contributing factor, but one wonders to what extent. It is a perfect storm where, even without the pandemic panic, our global demand to move goods exceeds the capacity at hand. Growing pains.
Meanwhile I will absolutely riot if I do not get my Flarp and Buzz Magnets from China by Christmas Day.
Reagan, “...if it moves...tax it...if it isn’t moving...subsidize it...”
And a lot of those boats can’t get through the Panama Canal
Rd later.
I wonder how much the unions container rules, eg repacking have impacted service. Also how much shrinkage from theft.
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